Preface
This situation, like a storm, has plunged the entire Asian financial market into chaos.
1. The fierce confrontation in the defense of Asian currencies
Compared with the previous battle, this currency clash is more dangerous. In the past, the volatility of the currency market may have given people a little respite, but now, it is like a raging wave, and there is no intention of stopping.
Behind this is the ambition of the United States to control the global economy.
The collapse of the yen has brought the Japanese economy to the brink of an abyss. In the past, Japan was able to temporarily save the yen by selling US bonds, but now no amount of efforts seem to be able to resist this torrent. The decline of the euro has also cast a thick shadow over the European economy.
2. The crazy strategy and intentions of the United States
The role of the United States in this Asian currency defense war is crazy. Its own economic situation is in shambles, GDP growth is stagnant, small and medium-sized banks are thundering, and high-quality commercial real estate properties are also in crisis, but it is like a stubborn gambler, biting the bite and not cutting interest rates, sticking to the strategy of high interest rates, trying to squeeze other currencies.
The reason why the United States is so crazy is that there is a careful plan behind it. They think of themselves as dealers, believing that they have absolute power in their hands and can manipulate the situation at will.
You see, the U.S. economy is now like a crumbling edifice, but it is still stubbornly holding on to the conventional stimulus of interest rate cuts. It would rather let mortgage rates rise above 7% and let the housing index fall to its lowest level in more than a decade rather than change its strategy. The employment data is even more watery, and a large number of part-time jobs are included, creating a false picture of prosperity. But this is nothing more than self-deception.
Can the United States really succeed with this crazy strategy? Can it really ignore the fragility of its own economy and force other currencies to suppress other currencies with high interest rates? Where will this ambition take the world economy, and how will other countries respond to this crazy move by the United States?
3. China's response and confidence
In this fierce battle to defend Asian currencies, China has shown firm determination and sufficient confidence. With more than $3 trillion in foreign exchange reserves and a sky-high monthly trade surplus, it acts as a solid fortress against currency shocks.
China is well aware that its ability to withstand this shock does not depend on its own strength, but also on the cost of US action and time. If the United States wants to squeeze the renminbi exchange rate, it will have to throw a large amount of renminbi to consume China's foreign exchange. But this is not an easy task, and China's foreign exchange reserves are not walls of paper that can be broken at a single point.
The proximity of the U.S. election has also added new variables to this currency war. Biden's complete defeat to Trump in the televised debate makes it possible for US politicians to make decisions in this currency game influenced by election factors. If the United States is unable to secure the renminbi before the election, Biden's road to re-election may be full of thorns.
China will not sit idly by, let alone be intimidated by US provocations. With a stable economic foundation and rich experience in coping with the situation, China has been able to flexibly adjust its strategy and respond to challenges calmly in the complex and volatile international economic situation.
Fourth, the key role of stabilizing domestic demand and real estate
In this currency defense war, the importance of stabilizing domestic demand has become more and more prominent. Domestic demand is like the endogenous driving force of our economy, and only strong domestic demand can stabilize its position in the face of external shocks.
The real estate industry occupies a central position in stabilizing domestic demand. Don't underestimate real estate, it is not just a pile of bricks and cement, it is related to many upstream and downstream industries, from building materials to decoration, from home appliances to home furnishings.
The state's stimulus for real estate is not a blind move, but has far-reaching significance. This initiative will not only promote the development of related industries and create a large number of jobs, but also allow capital to flow in the domestic market and enhance the vitality of the economy.
There is a misconception about the country's policy to stimulate real estate, believing that it will cause all kinds of problems. But let's understand that in the current situation, the stability of real estate is essential to withstand currency shocks.
epilogue
Only when the real estate market is stable can domestic demand be truly activated, and we will have enough strength to deal with external financial challenges.